Business

Molson Coors cheering on Habs but sees weaker hockey impact this year

MONTREAL - Molson Coors is enthusiastically cheering on the Habs but having just one Canadian hockey team make a playoff run this year is bound to hurt beer sales, the brewer said Wednesday.

"The Canadian beer businesses would have been better off with more Canadian teams in the playoffs," Molson Coors Canada CEO Stewart Glendinning said, noting that Ontario sales were helped by the Toronto Maple Leafs being in the first round last year.

The Montreal Canadiens lead the best-of-seven second-round series against the Boston Bruins 2-1. Last year, four Canadian teams â€” Montreal, Toronto, the Vancouver Canucks and Ottawa Senators â€” made the playoffs with only the Senators reaching the second round.

Glendinning wouldn't quantify the financial impact of the NHL playoffs.

"This doesn't make or break a year, let me clear about that, but it has an impact," he said in an interview after the brewer released strong first-quarter results.

He said any sport success drives sales, including the Toronto Raptors whose basketball playoff run ended in a close seventh game, but hockey is "religion in Canada" and especially important.

Glendinning said the Habs success this year will have some impact on sales in Quebec, but won't necessarily boost consumption in the rest of Canada.

The Denver and Montreal-based company, which reports in U.S. dollars, handily beat expectations as its first-quarter profit surged in part due to an improved performance in Canada despite weakness in the flagship Coors Light beer brand.

Molson Coors (NYSE:TAP, TSX:TPX.B) earned $163.4 million or 88 cents per diluted share for the period ended March 31. That compared with $28.5 million or 16 cents per share a year earlier.

Adjusting for one-time items, including $63.2 million received for the early termination of a joint venture with Modelo, underlying income more than doubled to $102.2 million or 55 cents per share, compared with $47.5 million or 26 cents per share in the 2013 quarter.

Molson Coors had been expected to earn 35 cents per share in adjusted profits on $818.4 million of net sales, according to analysts polled by Thomson Reuters.

Sales in the quarter were helped by the social media success of the Molson Canadian red fridge at the Sochi Olympics, even though the time difference limited the sales benefit of the Winter Games, Glendinning said. The Molson Canadian brand enjoyed its third consecutive quarter of market share growth.

In Canada, the company earned $88.3 million in pre-tax income on $347.1 million of net sales despite weak consumer demand and promotional challenges. Underlying pre-tax income increased 20.5 per cent to $35.3 million, while the lower Canadian dollar reduced profits by $2.4 million.

Sales to retail decreased 5.7 per cent due to a variety of factors, including weaker consumer demand, promotional challenges and the loss of the Modelo brands. Excluding this brand loss, which represented a one per cent reduction on overall company profits, Molson Coors said its Canadian market share decreased 0.5 per cent as Coors Light lost some ground to Bud Light.

Glendinning said two new products will be launched in limited distribution across the country this summer and later in the year. He declined to provide details, but said they are designed to attract non-beer drinkers. The brewer is also introducing Molson Canadian Stone Fruit Cider, a peach-apricot version of its original blend. Cider and ready-to-drink coolers were the only alcohol categories to grow last quarter as beer, spirits and wine all experienced decreases.

Overall, he said the brewer performed "relatively well" in Canada last quarter with all brands aside from Coors Light doing well. The brewer gained market share in lower-priced value beers and craft Creemore and Granville Island brands.

New advertising will soon be launched to boost Coors Light sales this summer that will attempt to grab people emotionally instead of last year's focus on cold beer. He also said the brand's drag can also be partially blamed on some consumers switching to Coors Banquet.

Molson Coors plans to invest an extra $40 million this year, raising spending in Canada to more than $100 million on initiatives that cut costs and improve efficiencies.

Earnings in the U.S. increased 4.9 per cent to $123.1 million, while Europe swung to a $16.2 million profit as brands gained market share in markets outside Russia and Ukraine, which were hurt by political unrest.

Analyst Mark Swartzberg of Stifel Nicolaus said he was encouraged by the 20 per cent increase in EBITDA in the quarter and the company's capital discipline since introducing a new dividend payout target of 18 to 22 per cent of pre-tax operating income.

On the New York Stock Exchange, Molson Coors shares gained $2.16 or 3.6 per cent to US$61.93 in afternoon trading. They were up $2.22 at C$67.52 in Toronto.